São Paulo Law School of Fundação Getulio Vargas – FGV DIREITO SP Research Paper Series – Legal Studies
Paper n. 117
Law and Economics in the Civil Law World:
The Case of Brazilian Courts
Mariana Pargendler*
São Paulo Law School of Fundação Getulio Vargas (FGV DIREITO SP)
Bruno Salama†
São Paulo Law School of Fundação Getulio Vargas (FGV DIREITO SP)
March 2015
This paper can be downloaded without charge from FGV DIREITO SP’s website:
http://direitogv.fgv.br/publicacoes/working-papers and at the Social Science Research Network (SSRN) electronic library at: http://www.ssrn.com/link/Direito-GV-LEG.html.
Please do not quote without author’s permission
*
Visiting Professor of Law, Stanford Law School (2014-2015); Professor of Law, Fundação Getulio Vargas School of Law (FGV Direito SP); Global Associate Professor of Law, New York University School of Law. †Professor of Law, Fundação Getulio Vargas School of Law (FGV Direito SP).
We are grateful to Diego Arguelhes, Owen Fiss, Nuno Garoupa, Martin Gelter, Jed Kroncke, José Reinaldo Lima Lopes, Ejan Mackaay, Rafael Maffei, Erickson Oliveira, and participants in the faculty workshop at FGV
Direito SP and the 2014 edition of Yale’s Seminario en Latinoamérica de Teoría Constitucional y Política
Electronic copy available at: http://ssrn.com/abstract=2514577 Law and Economics in the Civil Law World:
The Case of Brazilian Courts
Mariana Pargendler* & Bruno Salama**
October 2014
Abstract
Conventional wisdom holds that economic analysis of law is either embryonic or nonexistent outside of the United States generally and in civil law jurisdictions in particular. Existing explanations for the assumed lack of interest in the application of economic reasoning to legal problems range from the different structure of legal education and academia outside of the United States to the peculiar characteristics of civilian legal systems. This paper challenges this view by documenting and explaining the growing use of economic reasoning by Brazilian courts. We argue that, given the ever-greater role of courts in the formulation of public policies, the application of legal principles and rules increasingly calls for a theory of human behavior (such as that provided by economics) to help foresee the likely aggregate consequences of different interpretations of the law. Consistent with the traditional role of civilian legal scholarship in providing guidance for the application of law by courts, the further development of law and economics in Brazil is therefore likely to be mostly driven by judicial demand.
I. Introduction
It is difficult to overstate the influence of law and economics on U.S. law.1 Yet, in contrast to numerous instances of U.S. legal imperialism during the twentieth
* Visiting Professor of Law, Stanford Law School (2014-2015); Professor of Law, Fundação Getulio Vargas School of Law (FGV Direito SP); Global Associate Professor of Law, New York University School of Law.
** Professor of Law, Fundação Getulio Vargas School of Law (FGV Direito SP).
We are grateful to Diego Arguelhes, Owen Fiss, Nuno Garoupa, Martin Gelter, Jed Kroncke, José Reinaldo Lima Lopes, Ejan Mackaay, Rafael Maffei, Erickson Oliveira, and participants in the faculty
workshop at FGV Direito SP and the 2014 edition of Yale’s Seminario en Latinoamérica de Teoría
Constitucional y Política (SELA) for very helpful comments to an earlier version of this article. Alberto Barbosa Jr. provided research assistance. All errors are our own.
1 The prominence of law and economics in the United States is widely acknowledged by its supporters
and detractors alike. See, e.g., ROBERT COOTER &THOMAS ULEN,LAW AND ECONOMICS 2-3(5th ed.
2007) (“economics has changed the nature of legal scholarship, the common understanding of legal
Electronic copy available at: http://ssrn.com/abstract=2514577 2
century2 – culminating in what is sometimes referred to as the “Americanization of law”3 around the globe –, the diffusion of law and economics elsewhere has
apparently proceeded at a far slower pace.4 Common and civil lawyers alike repeatedly portray civil law jurisdictions as the province of abstract, doctrinal scholarship, with law students being instructed early in their careers to reason about the law exclusively in terms of the broad principles that it presupposes, rather than in terms of the consequences that it entails.5
A large body of literature documents the rejection of law and economics in the civil law world, and offers an extensive list of possible reasons for this apparent incompatibility. The catalog of potential culprits includes the alleged singularity of American ideology,6 divergent attitudes toward legal science and practice in the civilian world,7 the lack of mathematical and economic skills among civilian legal scholars,8 language barriers and inertia,9 the comparatively greater power of U.S. courts,10 the different incentives faced by law professors,11 the degree of protectionism within the legal profession,12 misconceptions about the comparative method,13 other cultural differences,14 and even Marxist domination of economics
importance of law and economics has also been documented quantitatively. See, e.g., William M.
Landes & Richard A. Posner, The Influence of Economics on Law: A Quantitative Study, 36J.L.&
ECON.385 (1993); and Fred R. Shapiro, The Most-Cited Law Review Articles Revisited, 71 CHI.-KENT
L.REV.751(1996).
2 Ugo Mattei, Why the Wind Changed: Intellectual Leadership in Western Law, 42 AM.J.COMP. L.
(2004).
3The phenomenon is so robust that France’s prestigious Archives de Philosophie du Droit devoted its
entire forty-fifth volume to this theme in 2001.
4 EJAN MACKAAY,LAW AND ECONOMICS FOR CIVIL LAW SYSTEMS 26(2013)(“In continental Europe, reception [of law and economics] came later, no doubt because of differences in language and legal system”).For an earlier survey reporting the slow pace of the diffusion of law and economics outside
of the United States, see ENCYCLOPEDIA OF LAW AND ECONOMICS (Boudewijn Bouckaert & Gerrit De
Geest eds., 2000) [hereinafter “Encyclopedia of Law and Economics”].
5JOHN HENRY MERRYMAN, THE CIVIL LAW TRADITION:AN INTRODUCTION TO THE LEGAL SYSTEMS
OF EUROPE AND LATIN AMERICA 67(2007).
6 Catherine Valcke,
The French Response to the World Bank’s Doing Business Reports, 60 U. TORONTO L.J. 197, 200 (2010).
7 See Kristoffel Grechenig & Martin Gelter, The Transatlantic Divergence in Legal Thought: American
Law and Economics vs. German Doctrinalism, 31 HASTINGS INT’L &COMP.L.REV. 295 (2008); Juan Javier del Granado & M. C. Mirow, The Future of the Economic Analysis of Law in Latin America: A Proposal for Model Codes, 83 CHI.-KENT L.REV. 293 (2008); and Christian Kirchner, The Difficult Reception of Law and Economics in Germany, 11 INT’L REV.L.&ECON. 277 (1991).
8 Dennis W.K. Khong, On Training Law and Economics Scholarship in the Legal Academia, 1 ASIAN
J.L.&ECON. (2010).
9 Robert Cooter & James Gordley, Economic Analysis in Civil Law Countries: Past, Present, Future,
11 INT’L REV.L.&ECON. 261, 262 (1991).
10 Richard Posner, The Future of the Law and Economics Movement in Europe 17 INT’L REV.L. & ECON. 3 (1997).
11 Nuno Garoupa & Thomas S. Ulen, The Market for Legal Innovation: Law and Economics in Europe
and the United States, 59 ALA.L.REV. 1555 (2008); Oren Gazal-Ayal, Economic Analysis of Law in North America, Europe and Israel, 3 REV.L.&ECON. 485, 486-487 (2007); and J. Mark Ramseyer, Law and Economics in Japan, 2011 U.ILL.L.REV. 1455.
12 Nuno Garoupa, The Law and Economics of Legal Parochialism, 2011 U.ILL.L.REV.1517.
13 Ugo Mattei & Roberto Pardolesi,
Law and Economics in Civil Law Countries: A Comparative Approach, 11 INT’L REV. L. & ECON. 265, 273 (1991). See also Roberto Pardolesi & Giuseppe
Bellantuono, Italy, in ENCYCLOPEDIA OF LAW AND ECONOMICS (“the hindrances encountered by the
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faculties.15 Even if the progress of law and economics scholarship in some civil law countries has been acknowledged from time to time,16 conventional wisdom still holds that the legal profession in civil law jurisdictions is impervious to economic reasoning.
At least in Brazil, however, the assumed insulation of legal practice from economic reasoning is plainly mistaken. To be sure, although law and economics scholarship in Brazil is rapidly gaining ground, it admittedly remains far from dominant. Perhaps surprisingly, most of the action in integrating economic and legal reasoning has not taken place within the Ivory Tower, but outside of it. Unbeknownst even to most educated observers,17 Brazilian courts are increasingly receptive to economic arguments. They have taken the lead in employing economic concepts to illuminate the application of the law and have repeatedly shown concern with incentives, cost-benefit analysis, and aggregate consequences of different legal regimes.
This suggests that those who decry the resistance to economic analysis in Brazil may simply have been looking at the wrong places. Moreover, we argue that the growing use of economic reasoning by Brazilian courts is not the product of blind imitation of foreign fads. Instead, it is the result of a profound transformation in the character and operation of the Brazilian legal system – to the effect that courts are increasingly in the business of shaping and implementing core public policies. While others have reflected on the new role for “the common law in the age of statutes,”18
14 Kenneth G. Dau-Schmidt & Carmen L. Brun, Lost in Translation: The Economic Analysis of Law in
the United States and Europe, 44 COLUM.J.TRANSNAT’L L. 602, 616 (2006).
15 J. Mark Ramseyer, Law and Economics in Japan, 2011 U.ILL.L.REV. 1455.
16 See, e.g., Ben Depoorter & Jef Demot,
The Cross-Atlantic Law and Economics Divide: A Dissent, 2011U.ILL.L. REV. 1593 (“the gap between the United States and Europe regarding the
development of law and economics is greatly exaggerated”); Carole M. Billiet, Formats for Law and
Economics in Legal Scholarship: Views and Wishes from Europe, 2011 U. ILL. L. REV. 1485 (“Europe’s internationally visible law and economics outputs do not give the full measure of its total law and economics production”); Hans-Bernd Schäfer, Law and Economics in Germany, Eur. Ass’n L. & Econ. (May 30, 2009),
http://ealeorg.blogspot.com/2009/05/third-in-series-on-development-of-law.html (“the authors write in their national language and publish in national law journals”); and Erich
Schanze, What is Law and Economics Today? A European View, in NEW FRONTIERS OF LAW AND
ECONOMICS, 99, 107 (Peter Nobel ed., 2006) (in German speaking Europe “there are hundreds of dissertations […] containing major chapters on law and economics”).
17 See, e.g., DECIO ZYLBERSZTAJN &RACHEL SZTAJN,DIREITO &ECONOMIA vii (2005) (“The field of Economics of Law, whose scope has expanded to include the field of Organizations, is little developed in Brazil. Except for the area of competition, other topics (…) are mostly ignored”); ARMANDO PINHEIRO &JAIRO SADDI,DIREITO,ECONOMIA E MERCADOS xxv (2006) (“the movement of Law & Economics, established in the United States and Europe, has always suffered great resistance in Brazil, especially due to the lack of understanding of some paradigms and because it is viewed as a ‘gringo thing,’ given that it comes from a common law regime, perpetuating the basic, but common, error that only countries with such type of legal system could do Law & Economics”); and Luciano Benetti
Timm, Lições do Nobel de Economia para o Direito, VALOR ECONÔMICO,Nov. 27, 2009 (“[i]t is well
known that our jurists, well-versed in Latin and French, solemnly refused to adopt the suggestions
coming from the Anglo-American legal system (‘common law’), as well as the legal and economic
theories originating in English language”). See also José R. Rodriguez, The Persistence of Formalism: Towards a Situated Critique Beyond the Classic Separation of Powers, 3 L. & DEV. J. 39, 41 (2010) (“Formalism persists everywhere despite 100 years of critical legal theory […] While this is a general phenomenon, it seems to be especially acute in Brazil”).
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we here address the implications of what we term the “civil law in the age of judicial
empowerment.”19
This article proceeds as follows. Part II defines what we mean by the use of economic reasoning in Brazilian courts. Part III outlines the ideological, political, and legal factors that are spurring judicial demand for economic insights in the adjudication of legal disputes. Part IV documents and analyzes the use of economic
reasoning in paradigmatic judicial decisions by Brazil’s higher courts. Part V concludes by suggesting possible implications of these developments for legal education and scholarship in civil law jurisdictions.
II. Economic Reasoning in Court
Before proceeding to substantiate our claim that Brazilian judges have increasingly employed economic reasoning in their opinions, we should clarify what we mean by the use of economic reasoning by Brazilian courts. For these purposes, it is helpful to begin by clarifying what it is not.
First, the use of economic reasoning in court is not to be confused with the recognition that certain legal developments are at least partially influenced by economic considerations.20 This should be a fairly uncontroversial proposition even in civil law jurisdictions. Prominent civil law scholars have long explained the evolution of key legal institutions and rules as practical responses to shifting economic needs.21 Also, it is no secret that a number of legal rules (such as the legal restrictions to self-contracting and self-dealing under Brazil’s civil and corporate law, among many others) are based on the behavioral assumption that individuals act as self-interested maximizers of their own utility (i.e., as a homo economicus) – a propensity that can at
times clash with societal objectives. Moreover, economic concepts such as monopoly, markets, and competition are known to be an integral part of antitrust law.22
Still, the fact that a legal rule is inspired by economic considerations does not necessarily entail the use of economic reasoning by courts. When a judge applies the Brazilian Civil Code to declare void a non-authorized sales contract entered into between an attorney (representing the principal) and the same attorney (acting for herself), economic reasoning will most likely be absent from her decision23 – and
19 The recent trend toward ever-greater judicial empowerment around the globe is well documented.
See, e.g., Ran Hirschl, The Political Origins of the New Constitutionalism, 11 IND.J.GLOBAL LEGAL STUD. 71, 71 (2004) (arguing that “in numerous countries and in several supranational entities, fundamental constitutional reform has transferred an unprecedented amount of power from representative institutions to judiciaries”).
20 MAX WEBER,ECONOMY AND SOCIETY 655-6, 883 (Guenther Roth & Clauss Wittich eds., Ephraim Fischoff et al. trans., 1978) (“Economic factors can therefore be said to have had an indirect influence only”; “economic conditions have […] everywhere played an important role, but they have nowhere been decisive alone and by themselves”).
21 See, e.g., TULLIO ASCARELLI, PANORAMA DO DIREITO COMERCIAL 22 (1947) (explaining the emergence of a separate body of commercial law in terms of the inadequacy of Roman-canonic law to the economic exigencies of a capitalist system).
22Posner attributes the development of law and economics in the United States in large part to “the curious American fascination with monopoly.” Richard Posner, The Future of the Law and Economics Movement in Europe, 17 INT’L REV.L.&ECON. 3, 4 (1997). The very field of antitrust law, however, was comparatively a latecomer in civil law jurisdictions.
23Brazilian Civil Code, Art. 117 (“Except as authorized by law or by the principal, the contract that the
5
appropriately so. In most cases where economic considerations are embedded in legal rules, the usual tenets of legal reasoning and interpretation will still suffice in their application.
Second, it is also important to distinguish the use of economic reasoning by Brazilian courts from the original aspirations of the law and economics movement of U.S. lineage.24 As articulated by Richard Posner, “economic analysis can illuminate, reveal as coherent, and in places improve [the law].”25 These are academic ambitions
of both descriptive and normative character – the chief idea being that economics can be used both to explain the underlying logic of the law and to evaluate whether the current legal regime is desirable from a cost-benefit standpoint. Accordingly, such a project has been widely criticized as subordinating or subsuming the law to economics.26
Conversely, the use of economic reasoning by Brazilian courts is the appropriation of key tenets and lessons from economics (especially microeconomics) as an instrument for the application of legal rules or principles.27 Economic insights illuminate legal interpretation not only when the law implicates economic concepts (as is often the case in antitrust and monetary law) but also when the legal principles or rules in question call for a forecast of the likely consequences of certain events or
legal regimes. Economics is thus at the service of the law, not the other way around. In this context, the concept of economic efficiency carries comparatively little weight.28
economic rationale for such a provision is straightforward: the underlying assumption is that a self-interested attorney would favor his own interests over those of the principal; as a result, the law offers as a default rule the regime that the parties presumably would have wanted – one that forbids the attorney from acting in a conflicted transaction).
24 This is emphatically not to suggest that the use of economic reasoning in courts as we describe it here does not exist in the United States. It certainly does, having in fact preceded the law and economics movement (see, e.g., United States v. Carroll Towing Co., 159 F.2d 169 (2d Cir. 1947), where judge Learned Hand laid out the famous formula that uses cost considerations to establish negligence). Since the inception of the law and economics movement, the use of economic arguments in court has flourished, decisively shaping the development of various areas of law. See, e.g., Posner &
Landes, supra note 1, at 386-7 (“[t]he impress of economics is strong on the calculation of damages in
tort, contract, securities, and other types of cases and even on monetary relief in divorce cases. (…)
Judges are increasingly receptive to economic arguments”); and Roberta Romano, After the Revolution
in Corporate Law, 55 J.LEGAL EDUC.342 (2005) (describing the impact of finance and economic theory on the development of U.S. corporate and securities law).
25 RICHARD POSNER,ECONOMIC ANALYSIS OF LAW XIX (6th ed. 2003). 26 See, e.g., Kronman,
supra note 1, at 161 (decrying the “built-in imperial instinct” in law and economics, “where the case is there to serve the theory, and not the other way around”).
27 One must bear in mind that is a broader definition of the practice of law and economics than that
typically employed by the scholars investigating the reception of law and economics outside of the United States. For instance, in a widely cited article, Garoupa and Ulen consider law and economics as the application of economics to non-obvious areas of law. Garoupa & Ulen, supra note 11, at 1567-8
(“for our purposes we adopt a definition suggested to us informally by Professor Louis Kaplow: ‘law
and economics’ is the application of economic analysis to any area of the law except those areas where
its application would be obvious”).
28 On this topic, see Ugo Mattei & Roberto Pardolesi, Law and Economics in Civil Law Countries: A
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For a simple illustration, consider the well-established rule that the victim of an unlawful act is entitled to recover lost profits (lucrum cessans). The rule requires
monetary damages to be fixed so as to put the aggrieved party in the position it would have been but for the unlawful act.29 The concrete application of this rule thus calls
for a prediction of what the victim’s profits would have been had the unlawful act not
been committed. And yet the law provides no theory of human behavior on which to ground such a prediction. Be it viewed as a science, an art or a social practice, legal thinking is essentially normative in character: it speaks about what ought to be, but has comparatively little to say about how the social world works – which is precisely the province of economics as well as of other social sciences.
In the Special Appeal 771,787, the issue before Brazil’s Superior Court of
Justice (Superior Tribunal de Justiça – STJ)30 was whether the government’s
imposition of price ceilings on sugar cane derivatives below the actual cost of production was unlawful and, if so, what the appropriate measure of damages payable to the aggrieved producers should be.31 In approaching these issues, the dissenting opinion by Justice Herman Benjamin relied squarely on economic lessons. Specifically, the opinion rejected the measure of damages claimed by the plaintiffs, which was calculated solely based on the difference between the price ceiling imposed by the government and what the price would have been had it been duly fixed according to the actual costs of production.
Quoting elementary lessons from a Portuguese law-and-economics textbook on the concept of demand elasticity, the Justice concluded that the proposed formula would likely overestimate the amount of damages, since the artificially low price likely increased the amount of the product sold. 32 As the Justice himself emphasized, such use of economic insights was instrumental in the application of the law. In his
words, although his analysis “resorted to economic tools and concepts in its
interpretative effort,” it was “purely legal” in nature.33
This simple, almost trivial example, is however illustrative of a broader trend. In this case, as in others, the use of economics explicitly replaces more intuitive forms of reasoning or rules of thumb. An important – and, as we shall argue, growing – number of legal norms in Brazil require adjudicators to ponder over the likely factual consequences of different events or legal regimes. Although the trend is partly driven by advancements in economic theory vis-à-vis the distant past (as is the case in the more nuanced application of the ancient legal concept of lost profits), it was significantly bolstered by a transformation in the underlying structure of the legal system, to which we now turn.
29 For its current formulation under Brazilian law,
see arts. 402, 403 and 927 of the Brazilian Civil Code.
30The STJ is Brazil’s court of last resort on the interpretation of federal law other than constitutional
law. Federal law, in turn, accounts for the lion’s share of Brazil’s legal system.
31 S.T.J., Resp No. 771.787, Órgão Julgador: 2ª. Turma, Relator: Otávio de Noronha, 15.04.2008,
S.T.J.J. (Braz.).
32 The Portuguese book quoted is VASCO RODRIGUES,ANÁLISE ECONÔMICA DO DIREITO 24 (2007).
33 S.T.J., Resp No. 771.787, Órgão Julgador: 2ª. Turma, Relator: Otávio de Noronha, 15.04.2008,
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III. The Rise of Economic Reasoning in Judicial Adjudication: The Driving Factors
One could be tempted to view the greater use of economic reasoning in a Latin American country as the artificial transplant of foreign academic fads that have corrupted the cohesion and purity of the civil law tradition. We suggest that such an assumption is unwarranted, for it places too much weight on the role of intellectual elites while failing to capture broader societal and legal forces at play. Our basic hypothesis is that contemporary Brazilian law – a typical exemplar of a civil law jurisdiction34 – is particularly amenable to economic reasoning for related and mutually reinforcing (i) ideological, (ii) political, and (iii) legal factors, to which we now turn.35
A. The Ideological Factor: The Rise of Progressivism
The first driving factor of the growing demand for economic reasoning is the ascent of progressive ideology as the underpinning of the modern Brazilian state. Progressivism – here, loosely understood as the antithesis of conservatism36 – is the ideology of advancement and development, which is based on a strong belief in human capacity to deliberately alter reality and ameliorate human condition. In Brazil, the rise to power of president Getulio Vargas in the early 1930s marked the triumph of progressivism as the dominant state ideology, which is one that resorts to the
“instrumental use of law” as a tool for “social engineering.”37 While conservatism
typically presupposes the wisdom embedded in existing rules and institutions, progressive ideology constantly puts it to test.
The state that embraces the mission of actively ordering and perfecting society
– in short, the progressive state – is the institutional incarnation of progressive
ideology. Brazil’s Constitution of 1988 is far from timid about its progressive ambitions. Article 3 explicitly articulates that “ensuring national development,” “eliminating poverty and marginalization, and reducing social and regional
inequalities,” as well as “promoting the well-being of all” are “fundamental objectives of the Federative Republic of Brazil.”
Brazil’s progressive state is significantly involved in the pursuit of a series of
concrete objectives or public policies – be they the elimination of illiteracy or the reduction of pollution, the promotion of industrialization or the fight against domestic
34 Brazil is consistently classified as a civil law jurisdiction subject to strong French influence. Nevertheless, as one of us has previously argued, Brazilian law has long incorporated influences from
both civil and common law origins. See Mariana Pargendler, Politics in the Origins: The Making of
Corporate Law in Nineteenth-Century Brazil, 60 AM. J. COMP. L. 805 (2012). See also, Mariana
Pargendler, The Rise and Decline of Legal Families, 60AM.J.COMP.L.1043(2012) (describing the
historical evolution and contingency of legal family classifications).
35 We developed an earlier version of this argument in Mariana Pargendler & Bruno Salama, Direito e
Consequência no Brasil: Em Busca de um Discurso sobre o Método, 262 REVISTA DE DIREITO ADMINISTRATIVO 95 (2013).
36 For present purposes, the term conservatism can be understood as a positional ideology against dismantling existing institutions (rather than an ideational one, which provides specific views about
how society ought to be organized). See Samuel P. Huntington, Conservatism as an Ideology, 51 AM.
POL.SCI.REV. 454, 468 (1957).
37 See José Reinaldo Lima Lopes, Regla y Compás, Metodología para un Trabajo Jurídico Sensato, in
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violence. The formulation and implementation of public policies, in turn, creates the need of tailoring legal instruments and solutions to the goals of achieving concrete normative ends. In order to accomplish such a task, the traditional techniques of legal reasoning – based on grammar, history, logic, and internal coherence – no longer suffice. Once the legal ends are given, the legal debate turns to the question of the
proper means to further such ends.
The legal controversy involving Law 11,340 of 2006 (“Lei Maria da Penha”) – a statute that, according to its preamble, was designed to create “mechanisms for
deterring domestic and familial violence against women” – is illustrative of these types of challenges. The main legal debate surrounding the statute did not lie in the legitimacy of its objectives (which were fairly uncontroversial38), but in whether the mechanisms provided by the statute were consistent with such goals. Accordingly, the Brazilian Supreme Court (Supremo Tribunal Federal – STF) had to decide on the
constitutionality of the statutory provision that conditioned the criminal prosecution
of wrongdoers to the “representation” (request) of the victim.
In a split decision, the Court ultimately decided to grant an interpretation “in accordance with the constitution” to the effect of permitting the criminal prosecution
of offenders notwithstanding the absence of representation by the victim. The court’s majority considered women’s well-known reluctance to file representations against their spouses, and concluded that the imposition of such requirement would
effectively “eliminate the constitutional protection afforded to women,”39 thus making
it particularly inept to accomplish the desired objective of curbing domestic violence.
Tellingly, the disagreement expressed in Justice Cezar Peluso’s dissenting opinion
concerned precisely the presumed concrete factual consequences of mandating or dispensing the victim’s representation – the type of inference that is typical of social sciences such as economics, but foreign to the deductive mode of legal reasoning that is said to characterize the civilian tradition.40 A behavioral theory – such as that offered by economics and other social sciences – about how actors respond to different rules and policies is therefore badly needed.
To be sure, portraying progressivism as a propeller of law and economics may sound oxymoronic, especially for American audiences.41 The law and economics movement that flourished in the United States in the 1960s decade was premised on a
38 The exceptions prove the rule. A lower court judge who declared the statute unconstitutional for depriving men of their regular means of control of women – arguing that “the world is, and shall continue to be, masculin” – was sanctioned by Brazil’s judicial oversight body National Council of
Justice (Conselho Nacional de Justiça – CNJ). The conviction was later reversed by STF.
S.T.F., MS 30.320, Relator: Ministro Marco Aurélio, 28.02.2011, S.T.F.J. (Braz.).
39 S.T.F., ADI No. 4.424, Relator: Ministro Marco Aurélio, 09.02.2012, S.T.F.J. (Braz.), as
summarized on the STF website,
http://stf.jus.br/portal/cms/verNoticiaDetalhe.asp?idConteudo=199853&caixaBusca=N. The final
version of the opinion had not yet been published when this article was finalized.
40 Id. Noticeably, Justice Peluso’s dissenting opinion specifically referred to “studies of several entities
of civil society and also the Applied Economic Research Institute (IPEA)” and also to “several
elements brought by people from the fields of sociology and human relations,” including “public
hearings that presented data justifying the [relevant] conception of the criminal lawsuit.”
41 See Herbert Hovenkamp, Knowledge About Welfare: Legal Realism and the Separation of Law and
Economics, 84 MINN.L.REV. 805, 810 (2000) (“progressive legal thought from roughly 1925 to 1960 [in the United States] is characterized by an unprecedented separation of law and economics”); and
9
laissez faire agenda that is still today routinely labeled as “conservative.”42 In the
Brazilian legal context, however, the rise of progressivism has gradually undermined strong versions of legal formalism that conceived legal categories as exclusively derived from history, logic or reason.43 The advancement of the progressive ideology in Brazil opened space for the sort of policy-based reasoning that so distinctively characterizes U.S. law up to present day, and that is so often deemed to be a catalyst for forward-looking approaches within law.
B. The Political Factor: The Ascent of the Judiciary
The growing demand by lawyers and judges for theories of human behavior is due not only to the widespread pursuit of public policies by the Brazilian progressive state, but also and especially by the ever greater role of courts in the formulation and implementation of such policies. Since 1988 the judiciary shifted from the periphery to the center of political power in Brazil.44 Following redemocratization, the Brazilian
Supreme Court took on the role of arbiter of the country’s great institutional and
political conflicts, a function previously exercised by the armed forces. Oscar Vilhena
Vieira aptly termed the country’s current regime as a “supremocracy.”45
The worldwide trend toward the expansion of judicial power assumed a particularly extreme configuration in Brazil. The avenues for judicial review of legislation – which is arguably the main mechanism for courts’ interference in
policymaking – are exceptionally broad. Whereas the vast majority of jurisdictions adopt either concentrated or diffuse modes of judicial review (that is, when they do not fail to recognize ex post judicial review altogether),46 Brazilian law contemplates
both forms of constitutional challenges to legislation.47 This hybrid system, combined with a long, detailed, and ambitious constitution,48 creates enormous leeway for judicial protagonism.
42 See e.g. STEVEN M.TELES,THE RISE OF THE CONSERVATIVE LEGAL MOVEMENT:THE BATTLE FOR
CONTROL OF THE LAW 90-134 (2010). But see Pierre Schlag, An Appreciative Comment on Coase’s The Problem of Social Cost: A View from the Left, 1986 WIS.L.REV. 919 (1986) (“Coase’s insights
can yield some left-leaning implications for the understanding of law and its relation to economics”)
and Four Conceptualizations of the Relations of Law to Economics (Tribulations of a Positivistic Social Science), 33 CARDOZO L.REV.2357 (2012) (comparing the approaches of Frank Knight, Ronald Coase, Richard Posner and Cass Sunstein). See also RICHARD POSNER, LAW, PRAGMATISM AND DEMOCRACY 274-288(arguing that Hayek’s position, in requiring judges to enforce custom without regard to consequences, is therefore antithetical to economic analysis).
43 MERRYMAN,supra note 5, at 91 (“While common lawyers tend to think of the division of the law as conventional, i.e., as a the product of some mixture of history, convenience, and habit, the influence of scholars and particularly of legal science has led civil lawyers to treat the matter of division of the law in more normative terms […] definitions and categories are thought to be scientifically derivable from objective legal reality”).
44 MATTHEW M. TAYLOR,JUDGING POLICY:COURTS AND POLICY REFORM IN DEMOCRATIC BRAZIl
(2008); and Marcos Paulo Verissimo, A Constituição de 1988, Vinte Anos Depois: Suprema Corte e
Ativismo Judicial “à Brasileira,” 4 REVISTA DIREITO GV 407 (2008) (the Constitution of 1988 “has transformed [the Brazilian Supreme Court] into one of the country’s major political actors”).
45 Oscar Vilhena Vieira, Supremocracia, 4 REVISTA DIREITO GV 441 (2008).
46 TOM GINSBURG,JUDICIAL REVIEW IN NEW DEMOCRACIES 7-8 (2003).
47 For an overview in English language, see Maria Angela Jardim de Santa Cruz Oliveira, Reforming
the Brazilian Supreme Court: A Comparative Approach, 5 WASH. U. GLOBAL STUD. L. REV. 99
(2006); and Stephen Zamora, Judicial Review In Latin America, 7 SW.J.L.&TRADE AM. 227 (2000).
48 Carlos Portugal Gouvêa,
10
This new prominence of the judicial branch in public policymaking has not gone unnoticed, and has triggered related innovations in institutional design. Law 9,868 of 1999, which regulates the procedure for concentrated judicial review,
innovates by permitting the STF to call “public hearings” (audiências públicas) to hear “the testimonies of persons with experience and expertise on the subject.” By
admitting public hearings before the court – a tool for information-gathering and accountability which is characteristic of typical policymaking arenas, such as the legislature and administrative agencies –, the statute both underscores and reinforces
the court’s role in shaping public policy.
This function, indeed, is ever more explicit. Breaking with the classical separation of powers49 and the archetypical conceptions of the role of courts in civil law jurisdictions,50 the STF is at present constitutionally empowered both to issue
“binding statements” (súmulas vinculantes) that must be followed by lower courts and
other branches of government and to pick its cases based on what it deems to be their
“general repercussion.”51 Law 11,418 of 2006 defines “general repercussion” as the “relevant questions from an economic, political, social and legal standpoint that transcend the subjective interests of the case.”52 It should come as no surprise that,
having been asked explicitly by the legislature to factor economic considerations into their decisions, the STF has obliged.
Indeed, the STF has expressly asserted that correcting a “forecast error by the
legislator” is a legitimate ground for judicial review.53 But then again, the business of forecasts falls outside the scope of the law’s essentially normative enterprise. In order
to fulfill such a task, judges face a choice between resorting to common sense or personal experience on how the world works54 or employing more systematic knowledge generated by the social sciences, such as economics.
C. The Legal Factor: The Changing Structure of the Law
Finally, the greater judicial role in policymaking does not operate in a legal vacuum. On the contrary, under a system that purports to uphold the rule of law, the growth in the power of the judiciary was accompanied by changes in the structure of legal rules.55 These changes, in turn, create increasing demand for economic reasoning in two ways: by directly incorporating economic consequences into the content of legal rules and by rendering the application of a given legal regime conditional on the desirability of its consequences.
49 Bruce Ackerman, The New Separation of Powers, 113 HARV.L.REV. 633 (2000).
50 Rodriguez, supra note 17, at 52 (“The [civilian] judge subsumes [facts to legal provisions] because
the political discussion is supposed to have been resolved in the Parliament: society has already decided on its differences and adopted a rule of conduct - the general and abstract law - that will serve as a reference for settling potential conflicts on that particular subject.”).
51 Art. 543-A, §3º and §7º of the Brazilian Civil Procedure Code.
52 Art. 2, which introduced art. 543-A to the Civil Procedure Code (emphasis added).
53 S.T.F., ADI No. 1.194-4, Relatora: Ministra Cármen Lúcia, 20.05.2009, S.T.F.J. (Braz.).
54
Id. (as when Justice Mendes concluded at the requirement of attorney review of a legal person’s constitutional documents did not decrease the number of errors, which, in his view, made such a mandate unconstitutional).
55 For an early recognition of these changes see WEBER,supra note 20, at 882-889 (analyzing the
anti-formalistic tendencies of modern legal development). See also MERRYMAN, supra note 5, at 94-98
11
In its canonical form, a legal rule contains both a description of a (past) fact
and its legal consequences. Article 121 of Brazil’s Criminal Code offers a representative example: “To kill someone. Penalty: imprisonment from six to twenty
years.” Economic reasoning might be useful in determining whether such a rule is
desirable before its enactment by the legislature, but it plays essentially no role in its
concrete adjudication. The main tasks before the decisionmaker are interpretative and
evidentiary in nature: circumscribing the meaning of the rule’s wording (i.e.: What is
the meaning of killing? What is the meaning of someone?) and determining whether
the fact described in abstract form therein has in fact materialized (by resorting to
standard evidentiary procedures). Although legal rules adhering to such a structure continue to exist – and, indeed, shouldcontinue to exist –, a growing number of legal commands follow a different model which is far more conducive to economic thinking.
First, there is a greater incidence of legal rules that prescribe sanctions that, instead of invariably applying to past facts, will apply or not depending on the expected consequences of the facts. This latter technique has, in fact, become the
hallmark of modern antitrust law, which originated in the United States and then quickly spread to other jurisdictions, including Brazil. In lieu of so-called per se rules
(which followed the classic legal rule structure of assigning sanctions to certain predetermined factual descriptions), virtually all conducts that receive competition
law scrutiny are now subject to what is known in the United States as “the rule of reason” standard and in Europe by the more eloquent label of “effects-based
analysis.”56
The recent change in the legal treatment of the commercial practice of
minimum “resale price maintenance” in distribution agreements in the United States
illustrates this point. While the practice agreement used to be illegal in all circumstances, it is now subject to the rule of reason, which means that the restriction will be permitted or not depending on a case-specific analysis of whether its likely effects are pro- or anticompetitive.57 Economic analysis therefore becomes essential for the application of such rules, since traditional legal methods of interpretation are of little help in ascertaining the actual market effects of any given conduct.
Second, the contours and methods for the application of legal principles also depart from those of a canonical legal rule. It is well known fact that legal principles, as opposed to legal rules, have become increasingly influential in the adjudication of legal disputes, in Brazil as elsewhere.58 But legal rules and legal principles have a markedly different structure. While legal rules are norms that “immediately describe
56 Damien Geradin & Caio Mario da Silva Pereira Neto, For a Rigorous “
Effects-based” Analysis of Vertical Restraints Adopted by Dominant Firms: A Comparison of EU and Brazilian Competition Law, 9 COMPETITION POL’Y INT’L 1-16 (2013).
57 Leegin Creative Leather Products, Inc. v. PSKS, Inc., 551 U.S. 877 (2007) (overruling the longstanding precedent Dr. Miles Medical Co. v. John D. Park & Sons Co., 220 U.S. 373 (1911), according to which minimum vertical price restraints were unlawful per se).
58 Alec Stone Sweet & Jud Mathews, Proportionality Balancing and Global Constitutionalism, 47
COLUM.J.TRANSNAT’L L. 72, 112 (2008); David S. Law, Generic Constitutional Law, 89 MINN.L.
REV. 652, 687 (2005); and HUMBERTO ÁVILA,TEORIA DOS PRINCÍPIOS 15-16 (2005). See also Moshe
12
behavior,” legal principles are norms that “instead of describing behavior, establish an ‘ideal state of affairs’ (that is, an objective) whose realization implies the adoption of certain behaviors.”59 Under Robert Alexy’s influential definition, legal principles are “optimization mandates,” that is, norms that direct the realization of a value or
objective to the greatest extent possible given the existing legal and factual constraints.60
Following the German tradition, the most popular test for deciding conflicts
between legal principles in Brazil is that of “proportionality.”61 The application of
proportionality test, in turn, incorporates to legal decisionmaking elements
traditionally viewed as “nonlegal,” since they pertain to the possible factual consequences of different regimes. In its conventional formulation, proportionality requires the decisionmaker to scrutinize different dimensions of the regime in question: (i) its suitability (does the means promote the end?), (ii) necessity (among
all available means equally apt to promote the end, are there other means that are less restrictive?), and (iii) proportionality in the narrow sense (do the advantages in
promoting the end outweigh the disadvantages brought about by the adoption of the means in question?).62 In a significant number of cases, answering the questions posed by the proportionality test requires a style of reasoning that is fundamentally different from the deductive endeavor that historically distinguishes the civilian method of “syllogism” or “subsumption.” It often becomes necessary to employ a theory of human behavior to predict if a certain measure is adequate or necessary to promote the ends.
In sum, the application of a canonical legal rule requires the determination of whether a fact has occurred, leaving generally little room for economic analysis in its enforcement. Effects-based rules, by contrast, condition the application of legal sanctions on a finding about the likely factual consequences of a given fact or conduct
– an inference for which economic reasoning is very helpful, if not utterly indispensable. The application of legal principles, in turn, depends on the evaluation of the likely factual consequences, not of a fact, but of the application of the norm itself.
As a result, the distinctive trait of the legal system vis-à-vis other systems –
the focus on discerning between what is lawful and what is unlawful63– can no longer be readily addressed by appealing to purely abstract and conceptual interpretation of legal norms. Probabilistic judgments about the likely effects of different legal regimes are increasingly indispensable. These, in turn, are empirical questions for which the traditional analytical methods provide no ready answer – but with respect to which the
59 PONTES DE MIRANDA,ITRATADO DE DIREITO PRIVADO 80 (RT, 2012) (note included by revisors Judith Martins Costa et al.).
60 ROBERT ALEXY, A THEORY OF CONSTITUTIONAL RIGHTS 44-61 (Julian Rivers trans., Oxford University Press 2002) (1986).
61 Bernhard Schlink, Proportionality in Constitutional Law: Why Everywhere But Here?, 22 DUKE J.
COMP.&INT.L.291, 296 (2012) (“In comparative constitutional law, the principle of proportionality is
often traced back to German roots (…). But there is nothing inherently German about the roots of the
principle of constitutionality (…). It is a response to a universal legal problem”).
62 For a description of the proportionality test, see Mathews & Sweet, supra note 58, at 75.
63 Niklas Luhmann, Law as a Social System, 83 NW.U.L.REV. 136, 139 (1989) (“Only the law can
say what is lawful and what is unlawful, and in deciding this question it must always refer to the results
13
social sciences can be of considerable assistance. In other words, the presumed consequences of one or another legal regime will ultimately determine the weight afforded to different principles in a given case. In this context, it is particularly useful to resort to lessons from the social sciences – including, but not limited to, economics
– in order to evaluate the probable effects of different legal regimes with a minimum degree of rationality.
IV. The Use of Economics by Brazilian Courts
Having laid out factors that have increased demand for economic reasoning in legal adjudication, we now turn to an overview of the most common forms by which economic reasoning has made an appearance in Brazilian judicial decisions. Our aim is not to scrutinize whether any specific argument was sound from an economic or legal standpoint: economics, like law, only seldom provides definitive or uncontroversial answers to any given problem. Neither do we make an attempt to systematically quantify the incidence of economic arguments in Brazilian judicial decisions, though the fact that the opinions described below come from important
cases decided by Brazil’s most prominent courts suggest that they are not mere
rarities or aberrations.64 Evidently, most court opinions, in Brazil as elsewhere, do not resort to economic arguments, and for good reasons.
Moreover, in referring to specific cases where judges employ economic reason we do not wish to deny that there are judges who are completely oblivious to economic thinking. Yet the decisions documented below, which implicitly or explicitly rely on economic lessons to solve legal problems, are surprising, not only in light of conventional wisdom, but also of the hurdles that had to be overcome for these arguments to surface: namely, the lack of in-depth economic training by the vast majority of Brazilian judges,65 the dearth of instruction in law and economics in law schools, the relative scarcity of law and economics scholarship in Portuguese language, and the rarity of studies applying economic insights to problems specific to Brazilian law. The cases described below however reveal that economic reasoning is
no stranger to at least a part of Brazil’s judiciary and that Brazilian judges are not
nearly as hostile to economic reasoning as the prototype of a common law judge would suggest.
A. The Application of Constitutional Principles
A particularly fertile, if surprising, area for the use of economic reasoning in Brazil has been the application of constitutional principles by the Supreme Court. The
STF’s 2003 decision in Direct Action of Unconstitutionality (Ação Direta de Inconstitucionalidade – ADI) 1,946 is illustrative in this regard. First, the decision
64 On this topic see Horacio Spector, Fairness and Welfare from a Comparative Law Perspective, 79
CHI.-KENT L.REV. 521, 537 (2004) (arguing that economic considerations are not completely absent
from legal science as practiced in the civilian world but are limited to hard cases).
14
concerned the rare delicate case of a constitutional challenge raised against a
constitutional amendment. Second, the Court’s bold decision to restrict the scope of a
literal interpretation of the amendment was critically motivated by the use of economic reasoning.
The case dealt with the funding of the social right to maternity leave provided by the Brazilian constitution. Prior to the amendment, employers were constitutionally and legally required to grant eligible women 120 days of maternity leave, but were at the same time entitled to obtain reimbursement of the salaries paid
during the leave period from Brazil’s social security system. In 1998, the newly -enacted Constitutional Amendment No. 20 – widely known as the “social security
reform” (reforma da previdência) – capped all social security payments to the amount
of R$1,200 (approximately US$1,000 at the time). If the new limit were to apply to
maternity leave, any difference between the new ceiling and a woman’s actual salary
would need to be funded by the employer. The Brazilian Socialist Party (Partido Socialista Brasileiro – PSB) filed suit, arguing that the application of the cap to
maternity leave payments violated the Constitution, in view of its explicit provision
requiring the “protection of women’s labor market” (Art. VII, XX).
The Court’s unanimous opinion written by Justice Sydney Sanches posited that shifting the financial burden of maternity leave onto employers would “facilitate and stimulate their option for male, instead of female, workers,” so the ceiling would
precisely “foster the discrimination that the Constitution sought to undercut.”66 The outcome of the case was clearly driven by the Court’s forecast of the effects that a
literal interpretation of the constitutional amendment would have on the rate and form of women participation in the workforce. Justice Sanches further emphasized the
“perceived lack of adequacy between the legal means (a limitation on payments by
the social security system and the transfer of the burden to the employer) and the normative end established under the Constitution to combat the discrimination of
women in the labor market.”67 Although the decision makes no formal reference to
economics, its reasoning is evidently based on a key tenet of price theory, driven by the law of supply and demand: namely, that an increase in the price of a production input will trigger a reduction in its demand.
Notice that at no point did the Court ponder about the economic efficiency of encouraging women’s participation in the workforce – a theme on which economists’
views can and do differ.68 The promotion of women’s workforce participation is a
given, that is, a prior political choice inscribed in the Constitution itself. The role of economics was to aid the attainment of a legal objective by providing a theory about the concrete effects of different legal regimes.
Another paradigmatic case involving social rights dealt with the scope of the Brazilian statute providing a homestead exemption to the so-called “family home”
(bem de família), according to which the personal residence of a debtor cannot be
66 S.T.F., ADI No. 1.946, Relator: Ministro Sydney Sanches, 03.04.2003, S.T.F.J. (Braz.).
67 Id.
68 Contrast GARY BECKER, A TREATISE ON THE FAMILY (1991) (positing that married women’s
specialization in domestic work can be efficient) with Edward J. McCaffery, Slouching Towards
15
foreclosed.69 The same statute specifies a number of exceptions to this exemption, including one that authorizes foreclosure of the home of a lease guarantor.70 The constitutionality of the guarantor exception was challenged before the STF based on the argument that it violated the constitutional right to housing (direito à moradia)
inserted by Constitutional Amendment No. 26 of 2000.
In affirming the constitutionality of the exception, the majority opinion written by Justice Cezar Peluso argued that the right to housing was not synonymous with
home ownership. Instead, the fact that “there are few property owners in Brazil” justified, in his view, the “stimulus to lease arrangements,” which was presumably
achieved by the challenged exception.71 Justice Peluso’s opinion concluded that
eliminating the exception “would disrupt market equilibrium, systematically requiring
costlier kinds of guarantees for residential leases, thereby harming the constitutional
right to housing.”72 The opinion not only alludes to facts that are apparently outside
the scope of the legal rule in question (such as the proportion of Brazilians that do not own real property), but also implicitly employs a standard model of supply and demand to infer causality between the interpretation of the law by the Supreme Court and the available supply of residential homes and their respective prices.
The use of economic reasoning in the decisions above – with a particular focus on the incentives structure generated by different rules – was by no means exceptional in STF jurisprudence. In its 2013 decision in Reclamação 4,374, the STF reversed its
prior ruling to deem unconstitutional the statutory provision that excluded welfare payments to the elderly whose family earned more than one-fourth of a minimum
salary per month. The majority opinion by Justice Mendes acknowledged that “it was
not up to the Federal Supreme Court to assess the political and economic convenience of the sums that can or should serve as the basis for measuring poverty.”73
Nevertheless, in deeming the existing threshold unconstitutional, the decision not only
referred to the changes in legal and economic conditions since the Court’s original
ruling, but also to the fact that the current system “ends up discouraging contributions to the social security system, further increasing informality.”74
An even more explicit use of incentives rhetoric took place in the decision of ADI 4,425, in which the STF found unconstitutional a number of provisions of Constitutional Amendment No. 62 of 2009, which addressed the system of enforcement of monetary judgments against the State (precatório). Among the amendment’s innovations was the ability of the government to institute a reverse
auction, which would permit private parties to escape the lengthy line to receive payment by agreeing to receive a haircut. The majority opinion written by Justice
Luiz Fux maintained that “the existence of a reverse auction system would represent
an incentive for the State not to perform its obligations, aggravating the illiquidity of the judgments and increasing the discount (…). In other words: the system of incentives generated by the auction model promoted opposite results to those desired by the Constitution.”75 Similar decisions employing the language of incentives to
69 Law No. 8,009 of 1990.
70 Id., Art. 3.
71 S.T.F., RE No. 407.688-8, Relator: Ministro Cezar Peluso, 08.02.2006, S.T.F.J. (Braz.).
72 Id.
73 S.T.F., Rcl. No. 4.374, Relator: Ministro Gilmar Mendes, 18.04.2013, S.T.F.J. (Braz.).
74 Id.
16
reach constitutional law conclusions abound, being far too numerous to be described in full.
In other cases, the STF went so far as to draw specific inferences about the implications of certain legal institutions for Brazil’s economic development more
generally. In the AgReg 5,206-7, decided in 2001, the question was whether Brazil’s
Arbitration Law of 1996 – which sought to regulate and enforce the contractual
parties’ agreement to submit their disputes to arbitration – was valid in view of the
constitutional rule that “the law shall not exclude from judicial appraisal any violation or threat to a right” (Art. 5, XXXV). Concluding that the Arbitration Law passed
constitutional muster, Justice Ilmar Galvão explicitly reasoned that the observed
“avalanche of lawsuits” in the judiciary, combined with a “slowness that surpassed maximum tolerable limits,” constituted a “serious disincentive to business, precisely
in a moment in which one expects a sharp increment in business activities among us, especially due to the celebrated flows of foreign capital in view of exploring new
enterprises of an economic nature.” In this context, he argued, “the Brazilian
legislator came up with the alternative of an Arbitral Tribunal as a solution for this serious problem, aiming to ensure the country’s economic development.” 76
In the same vein is the opinion of Justice Joaquim Barbosa in ADI 1,194, which challenged, inter alia, the provision of the Statute of the Brazilian Bar
Association (Estatuto da OAB) attributing to the lawyer of the winning party of a lawsuit the judicial award of attorney’s fees. The Justice concluded that the destination of the award of attorney’s fees shall be a matter of freedom of contract, a solution which “not only unlocks the access channels to the Judiciary, but also permits the essential imperatives of economic rationality, which are fundamental for
the country’s growth, to apply, without discrimination, to lawyers, in the same way
that they apply to other categories of professionals.”77 Similarly, in the Extraordinary Appeal 422,941, the reporting Justice Carlos Velloso claimed that the government’s imposition of price ceilings below the cost of production “constituted a serious
obstacle to the exercise of economic activity, in violation of the principle of free
enterprise.”78 He added that the “establishment of well-defined rules of state
intervention in the economy, and their compliance, are fundamental for the maturation of Brazilian institutions and market, ensuring the necessary economic stability that
conduces to national development.”79
Moreover, there are decisions in which different Justices employ economic reasoning to reach disparate conclusions. In ADI 4,167, one of the questions before the Court was the scope of the expression salary “floor” for elementary school
teachers, as specified by a new federal statute applicable to all Brazilian states. Justice
Joaquim Barbosa argued that the term floor “can be interpreted in accordance with the
intention of strengthening and improving public education services.”80 He then argued that “adequate compensation of teachers and other education professionals is one of the useful mechanisms for the attainment of such objective.”81 In his view, “if the
76 S.T.F., AgRg No. 5.206-7 Relator: Ministro Sepúlveda Pertence, 12.12.2001, S.T.F.J. (Braz.).
77 S.T.F., ADI No. 1.194-4, Relatora: Ministra Cármen Lúcia, 20.05.2009, S.T.F.J. (Braz.).
78 S.T.F., RE No. 422.941, Relator: Carlos Velloso, 06.12.2005, S.T.F.J. (Braz.).
79 Id.
80 S.T.F., ADI No. 4.167, Relator: Ministro Joaquim Barbosa, 27.04.2011, S.T.F.J. (Braz.)..
17
floor comprises the teacher’s global remuneration, the additional payments
(gratificação) may equal or exceed the minimum, so as to annul or mitigate the incentives for the diligent professional,”82 hence resulting in the “perceptible
deterrence to the incentive and responsibility policies that are necessary for the provision of quality educational services by the State based in a most relevant
criterion: merit.”83
Conversely, Justice Gilmar Mendes contended that the interpretation of floor as synonymous with basic salary, as advocated by Justice Barbosa, could lead to the
“impossibility of expansion of education services,”84 due to a substantial increase in
teacher compensation. Moreover, he reasoned, such an interpretation would create an incentive for the states to restructure existing compensation packages so as to eliminate any bonus payments in addition to the basic salary – a conclusion which, in
his words, derived from “pure game theory.”85
B. Teleological or Purposive Interpretation of Statutes
The STF is however not alone in resorting to economic lessons in its opinions. Economic reasoning is also prevalent in the decisions of the STJ. The use of economic insight is particularly noticeable when the Court employs a teleological or purposive method of statutory interpretation, a method with a long pedigree in the Western tradition.86
For instance, in the early 2000s, the STJ had to determine the scope of Art. 6 of the statute regulating the concession of public services.87 The rule in question expressly allowed concessionaires to suspend the provision of public services to clients in default. The question before the court was whether the rule applied to the
provision of “essential services,” such as water, gas or energy, given that Art. 22 of
the Brazilian Consumer Protection Code88 requires utilities to provide essential
services in a “continuous” fashion. The majority opinion by Justice Gomes de Barros
repudiated the interpretation that prevented concessionaires from suspending the provision of services, a regime which, in his view, would generate a “domino effect.”89 Indeed, he maintained, “in finding out that a neighbor is receiving energy for free, the citizen will tend to bestow on himself such tempting benefit.”90 The result would be that “soon enough, nobody willhonor the electricity bill.”91
The STJ has also recently resorted to economic reasoning in interpreting
Brazil’s consumer protection law, so as not to hurt the people the law is trying to
82 Id.
83 Id. 84 Id. 85 Id.
86 José Reinaldo Lima Lopes, Raciocínio Jurídico e Economia, 8 REVISTA DE DIREITO PÚBLICO DA
ECONOMIA – RDPE 137,146-147 (2011).
87 Law No. 8,987 of 1995.
88 Law No. 8,078 of 1990.
89 S.T.J., Resp No. 363.943, Órgão Julgador: 1ª Seção, Relator: Humberto Gomes de Barros,
10.12.2003, S.T.J.J. (Braz.). 90 Id.
